Here, chairman of the World Business Angel Investment Forum, Baybars Altuntas, provides Business Advice readers with guidance on securing interest from an angel investor in a startup.
Angel investment has enjoyed increased exposure in recent years, and when world leaders identified it as one of the crucial lifelines that would help bring stability and prosperity to the world’s economies, business owners and economists everywhere have taken notice.
Today, there is a wave of new entrepreneurs ready to get their businesses off the ground, but many are not sure how to go about seeking investment and gaining interest from an angel investor.
People, not projects
Although the business idea you present to an investor does have to be adequate, angel investors focus far more on the person who comes to them rather than the project they pitch, so give plenty of thought to the way you present yourself.
This includes your physical appearance, your demeanour and the words you use in your pitch. If you come across as an engaging and inspiring person, you are more likely to attract interest from an angel investor.
Elevator pitch
Angels have seen it all in business, and if you’re going to grab their attention, you are going to need to make your pitch succinct and captivating. So, forget the long, rambling presentation and work on perfecting your elevator pitch.
A good entrepreneur should be able to grab interest from an angel investor by explaining their key points around financing, the payback period and exit strategy. This should take just five minutes – any longer and you are likely to lose an investor’s interest and come off as someone who’s not going to be an engaging person to work with.
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Alexa Chung secures venture capital from Five Guys and Chilango investors
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Exit strategy
Addressing a mutually-beneficial exit strategy during your pitch is a must, and it is common for entrepreneurs to get so caught up in starting a business relationship that they neglect to think of how they will ultimately finish it.
Angel investors want to know exactly what they stand to gain from a business arrangement and how much of their time it will require, so a firm exit strategy is vital for getting interest from an angel investor.
Know your angel
They may be experienced and wealthy, but this doesn’t mean that an angel investor’s money is just there for the taking. If an angel invests in you, they want to know it is because you are a good match, and not just because you needed the funds they could provide.
So, research your prospective angel investors. Get to know their backgrounds, previous business arrangements and passions, if for no other reason than because they will give you a good indication of how good a match they would be for you.
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Sectors
An angel investor is unlikely to invest in a health product if their expertise is in communications, and they are unlikely to have the contacts and resources that would be most relevant to your proposal.
When looking at prospective investors, pay particular attention to the sorts of investments they make, and consider how well your pitch fits into this demographic.
Due diligence
In the event that an angel decides to invest in your company, it is standard for a period of due diligence, or “probation” to occur, so expect it and understand the need for it.
A pitch is one thing – its whole point is to be appealing – but if the reality of your business credentials or numbers is not in line with the information you present in your pitch, then the investor has every right and reason to reconsider their offer of investment.
Don’t take the due diligence period as discouraging – it is a wise move on an investor’s part. Coming out of this period successfully will only be further validation of your business’s potential.
Baybars Altuntas is chairman at the World Business Angel Investment Forum and an experienced angel investor.
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